It looks like the industry is ready to take off again.
Soaring demand causes Intel chip-set prices to surge 20%
A service of Semiconductor Business News, CMP Media Inc.
Story posted 2 p.m. EST/11 a.m., PST, 7/26/99
By Mark Hachman, Sandy Chen, and Barbara Jorgensen
SANTA CLARA, Calif. (ChipWire/EBN) -- A sharp increase in demand for Intel Corp.'s mainstream PC chip sets caused prices to spike as much as 20% last week, and motherboard vendors fear the shortage will persist until September.
Intel confirmed the scant supply of its 440BX and 440ZX chip sets, products designed for the high-volume corporate PC market. While motherboard vendors initially declined to raise prices of their BX- and ZX-based boards, some said the shortfall may delay product introductions by lower-tier suppliers.
"We're acknowledging a shortage of BX and ZX parts, and we're working quickly to meet that [demand]," said a spokesman for Intel. "It's a case where demand for the product continues to be extremely strong. It's a good problem."
The specific causes of the shortage vary, but of five customers polled, most said an unexpected surge in overall demand--as much as 40%, according to one Asian distributor--has caused prices of the two chip sets to rise since late June. In addition, some worried that problems with the Intel 810, the 440BX's successor, would mean greater reliance on the BX and the ZX. The BX chip set is targeted at mainstream PCs, while the ZX is designed into lower-end systems.
The situation with both chip sets was felt most last week, when demand for 440BX and 440ZX chip sets suddenly increased. Even the predecessor to the 440BX, the 440LX, has experienced a 25% price spike during the same period, according to independent distributor NECX of Peabody, Mass. Prices for the 440BX have increased since June 25, when it was $26.78. Just last week alone, the price jumped from $27.63 to $33.50. The price of the 440ZX has risen from $17.48 on June 25, to $20.50 last week.
"The motherboard demand in the second quarter this year was unexpectedly strong," one Asian motherboard maker said. "Intel's forecast supply for both chip sets was not able to meet the demand. It usually takes from one month to 45 days for Intel to solve shortage problems, so the shortage will remain till the end of September."
The Intel spokesman declined to comment on when the company expects to satisfy the 440BX and 440ZX demand, reiterating that Intel is "working quickly" to meet customer orders. Industry sources said Intel is shipping product first to its top-tier, key OEM accounts, forcing second-tier OEMs, some white-box makers, and merchant motherboard suppliers to fend for themselves.
Some motherboard makers noted the chip set shortage two weeks ago, and warned it would begin affecting the supply of their own BX- and ZX-based boards as early as this week. Most said prices of their own high-end BX boards would remain stable, at about $125, while ZX boards should stay at around $70 -- for now. "The shortage of 440ZX is really serious," said one executive of an Asian distributor. "It's really tough to allocate the chip. The pricing is there, but you can't find them."
NECX, which now operates a global exchange in conjunction with Japan's Sumitomo Corp., reports that demand from Far East motherboard makers is "unbelievable," said Frank Cavallaro, NECX's director of worldwide sales. "Demand is huge for the BX right now, and pricing isn't the problem [in fulfilling demand]. We would be able to sell as much as we can get our hands on."
Although the 440BX and 440ZX chip sets were designed as a stable, long-term platform for corporate customers, Intel has encouraged customers to transition to the Intel 810, or Whitney, an integrated graphics chip set introduced in late April and designed for the low end of the mainstream arena. But quality problems have delayed the 810, most notably a bug that has affected the chip set's ability to keep correct time.
While Intel, analysts and even customers initially characterized the problems as minor, an aura of instability surrounding the 810 has surfaced, motherboard makers said. Although the Intel spokesman said the 810 is the fastest-ramping chip set in history, with more than 3 million units produced, analysts said 810 supply is too low for the chip set to serve as a mainstream product.
"The 810 chip set had some quality problems in the beginning, so the market hesitated to accept the chip set and remained using the 440BX and 440ZX," a Taiwanese motherboard maker said.
"We want to make really sure we have a stable solution," said a smaller, U.S.-based motherboard supplier. "That's [we started] our first [810] boards in mid-July."
NECX concluded that last week's price spike might be the first hint of panic buying. "What's happened in the past week is based on everybody wondering whether there would be a fix for the Whitney," Cavallaro said. "Previously, they were hedging their bets on the BX, but now there's no confidence that the bugs will be worked out, and the BX is the interim fix. . . . People have begun to realize that there may not be a new chip set, and everybody's jumping on the BX bandwagon."
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